India: RBI seen on prolonged hold – UOB

UOB’s Jester Koh notes that the Reserve Bank of India (RBI) kept the policy repo rate at 5.25% in April 2026 and retained a neutral stance. He highlights RBI’s new Gross Domestic Product (GDP) and Consumer Price Index (CPI) projections, flags growth downside and inflation upside risks, and expects the policy repo rate to remain unchanged at 5.25% through 2026 as policy flexibility is preserved.

RBI holds steady and keeps options open

"At its 8 Apr 2026 MPC meeting, the Reserve Bank of India (RBI) unanimously voted to keep the policy repo rate unchanged at 5.25%, in line with expectations of all 34 analysts surveyed by Bloomberg (including UOB). Accordingly, the standing deposit facility (SDF) and marginal standing facility (MSF) rates were also left unchanged at 5.00% and 5.50%, respectively. The MPC continued to maintain a neutral monetary policy stance."

"On growth, based on the new GDP series (base year 2022-23), the RBI projects growth to moderate to 6.9% in FY27 (1Q: 6.8%, 2Q: 6.7%, 3Q: 7.0%, 4Q: 7.2%), down from 7.6% in FY26 based on the second advance estimates."

"On inflation, the RBI released its FY27 CPI projections based on the new CPI series (2024=100) and expects inflation to accelerate to 4.6% (Feb FY26 MPC forecast: 2.1%). Upside risks stem from “persistently elevated energy prices due to the West Asia conflict and possible El Niño conditions, which could adversely affect the southwest monsoon”."

"Nevertheless, the RBI noted that underlying inflationary pressures (beyond food and energy) are expected to remain contained. Our FY27 inflation projection is slightly higher than the RBI’s at 4.8%, driven by low base effects and potential tightening in food supply, as fertilizer shortages could weigh on crop yields during the Zaid and Kharif sowing seasons."

"Given uncertainty over the extent of the drag on growth and the upside risks to inflation, the RBI is likely to preserve policy flexibility, as reinforced by its neutral monetary policy stance which enables the central bank “to respond judiciously to incoming information”. We maintain our forecast that the RBI will keep the policy repo rate unchanged at 5.25% through 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)